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6 PE funds make the cut for 26% in SBI General

The stake sale by Insurance Australia Group (IAG) will value SBI General Insurance at Rs 12,000 crore.

, ET Bureau|
Updated: Jun 24, 2019, 07.29 AM IST
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PE investors may tie up with one another to acquire IAG stake.
MUMBAI: Six private equity funds including PremjiInvest, Carlyle, ChrysCapital and GIC of Singapore, are among those in the shortlist for picking up a 26% stake in SBI General Insurance that will cost the acquirer about Rs 3,000 crore, two people close to the development told ET.

The stake sale by Insurance Australia Group (IAG) will value SBI General Insurance at Rs 12,000 crore. Goldman Sachs is running the process and the deal is likely to be announced shortly, said the people cited above. “The deal is in the final stages and will be announced in a couple of weeks, after which they (the stakeholders concerned) will go to the insurance regulator for approvals,” said one of them.

PremjiInvest declined to comment. ChrysCapital, Carlyle and IAG didn’t respond to queries. GIC of Singapore could not be immediately reached for comment. Incidentally, Carlyle and GIC of Singapore are reportedly in the process of buying a 10% stake in SBI Life Insurance.

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The private equity investors may team up with one another and create groups to buy IAG stake. GIC of Singapore may tie up with ChrysCapital for the deal, said one of the sources cited above. ChrysCapital has been joining hands with other PEs to bid for businesses.

State Bank of India (SBI) and IAG formed the joint venture in 2010 as a 74:26 partnership and the venture is now ranked eighth by way of gross written premiums among private insurers. IAG paid Rs 542 crore for its 26% stake.

IAG Restructuring Asia-Pacific Ops
Among private insurers, the joint venture’s market share is 5.77%.

“Earlier, reinsurance companies were looking at buying into SBI General but that would have led to a conflict as they provide us support through treaties,” said an executive of the company.

The biggest Australian general insurer is restructuring its Asia-Pacific operations and has already exited Indonesia, Thailand and Vietnam. IAG is concentrating on businesses in New Zealand and Australia.

For price discovery, SBI had earlier sold 4% stake in SBI General Insurance for Rs 482 crore to Axis New Opportunities Fund and PremjiInvest, valuing the company at Rs 12,000 crore in September 2018. SBI currently holds a 70% stake. SBI General has a share capital of Rs 210 crore. As of FY19, the company’s overall market ranking was 13 among about 30 insurers. It had recorded 32.83% growth in gross written premiums in FY19 at Rs 4,717 crore, compared with broader industry growth of 12.95%.

The company has entered into strategic tieups with four large car manufacturers to drive growth in the motor portfolio. It currently has a presence through 23,000 branches of the State Bank group and more than 5,500 regional rural banks. That ensures reach in more than 110 cities.

Private equity funds have been buying into insurance as India is one of the world’s fastest-expanding markets in the sector and is set to grow to $280 billion by FY20, as per a study by Associated Chambers of Commerce and Industry of India (Assocham). KKR is an investor in SBI Life, while True North has bought 51% in Max Bupa.

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